5 Things You’ll Want to Know About Pfizer’s Future

Investors liked what they saw with Pfizer‘s (NYSE: PFE) second-quarter earnings results, announced on Tuesday. Although revenue growth of 4% wasn’t anything to get excited about, the big pharma company reported that its Q2 adjusted earnings per share jumped 21% from the prior-year period.

What those results don’t tell you, however, is what’s next for Pfizer. But the drugmaker’s top executives addressed several topics during the Q2 earnings conference call related to what could be in store. Here are five things you’ll want to know about what they said concerning Pfizer’s future.

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1. Current blockbusters

Pfizer’s fastest-growing blockbusters right now are anticoagulant Eliquis, immunology drug Xeljanz, and breast cancer drug Ibrance. The company’s management didn’t say much about Eliquis, but with sales for the drug soaring 47% year over year in Q2, management didn’t have to. Pfizer CEO Ian Read did note, though, that the Eliquis has opened its market share lead from 10% to 13% ahead of its top rivals.

Sales for Xeljanz jumped 37% in the second quarter. More sizzling growth should be on the way. Read pointed to recent regulatory approvals in the U.S. and Japan for Xeljanz in treating ulcerative colitis and a European approval for the drug in combination with methotrexate in treating psoriatic arthritis. Pfizer also anticipates European approval for Xeljanz in the ulcerative colitis indication. Read sounded unconcerned about potential competition for Xeljanz from Lilly‘s Taltz, because of what he viewed as a weaker product label.

Although U.S. sales growth for Ibrance slowed in the second quarter, international sales momentum looked good. Read stated that Ibrance’s total prescription share among CDK inhibitors stands at 91% despite competition from Lilly and Novartis. Pfizer COO Albert Bourla said the company anticipates significant growth for Ibrance from approvals for additional indications.

2. Top pipeline candidates

Pfizer’s management believes the company has its strongest pipeline in decades. Read highlighted the potential for tafamadis in treating TTR cardiomyopathy. Although this disease is rare, Pfizer thinks it’s significantly underdiagnosed and presents a large opportunity for the company.

Read also especially likes the prospects for tanezumab, a non-opioid pain drug that Pfizer is developing with Lilly. Pfizer’s head of research and development, Mikael Dolsten, said the company was pleased with the efficacy and safety profile of the drug in late-stage clinical testing. Pfizer expects to announce more results for the drug next year.

The drugmaker awaits regulatory approval decisions for four cancer drugs Read singled out: lorlatinib, dacomitinib, talazoparib, and glasdegib. Although the PARP inhibitor class of drug in general hasn’t been as successful as some had expected, Dolsten thinks talazoparib could stand out above its rivals because of its unique method of binding and trapping DNA.

3. Growth for established medicines

In early July, Pfizer announced a reorganization that will change the name of its essential health segment to “established medicines” in 2019. Biosimilars and sterile injectables will move to the innovative-medicines segment. Can the legacy drugs and drugs losing exclusivity actually be a growth area for Pfizer? The company’s executives think it can.

Bourla stated that Pfizer sees urbanization in emerging markets as a key growth driver for its established-medicines segment. He particularly noted the rise of the middle class in Asia. With the reorganization, Pfizer is putting a leader of the established medicines business in China to focus on this tremendous market opportunity.

Don’t think that the innovative medicines segment will be hurt too much by gaining the struggling sterile injectables business, though. Read said Pfizer expects to see improved year-over-year comparisons for the business beginning in the third quarter.

4. President Trump’s proposed healthcare changes

Read said Pfizer continues to work with President Trump on proposed healthcare changes. He likes the idea of removing safe-harbor protection for drug rebates and thinks these moves could help Xeljanz and its biosimilars gain more market penetration.

Rebates could be completely going away over time, in Read’s view. However, he is supportive of these efforts. Read believes that removing rebates could be beneficial to companies that launch new drugs over the next five years or so.

As for drug price increases, Read doesn’t see tying price increases to healthcare inflation rates as a problem for Pfizer. He thinks Pfizer’s growth will primarily stem from innovative products in new markets, rather than from price increases.

5. Potential acquisitions

Will Pfizer make a big acquisition anytime soon? Probably not. Read said he doesn’t think the company needs to make a huge deal to drive growth. But that doesn’t mean Pfizer won’t be active in business development.

Read said the company is focused on assets in phase 2 or early phase 3 development. When asked about the potential for acquiring additional gene therapy programs, he replied that Pfizer would be interested in buying gene-therapy assets that weren’t overpriced.

Shifting gears

Pfizer’s management team anticipates winning approvals for 15 new blockbuster drugs or indications by 2022, including recent approvals for Xeljanz and Xtandi. They think better days are ahead for established medicines and for the sterile-injectables business.

My key takeaway from Pfizer’s Q2 conference call is that it sounds as if the company is shifting gears. What I mean is that Pfizer has only generated low growth in recent years but realistically expects to achieve significantly higher growth in the future, especially after 2020. If you believe the company can successfully shift gears, as I do, then the stock looks like a solid long-term pick.

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Keith Speights owns shares of Pfizer. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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